Joseph Wang (“Fed Guy”) in one of the interviews gives the following argument to the question whether the markets can handle the Fed hiking to 3-4%:
What happens if you are a high levered fund and you are losing money on your bonds, then you have to sell stocks to rebalance, because you have to manage a portfolio and so forth.
Can somebody help me to understand this statement? If you are 3x long bonds and they are selling, then you just sell bonds that you borrowed on margin and this way delever, why to sell stocks?
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